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I may no longer be a tax expert

Expertise is gained through mastery of the domain: a thorough understanding of the existing tax regulations and the ongoing battle to stay abreast of the new law changes as they occur.  The recent changes to the tax code have levelled the playing field for tax preparers as old rules fade away and new rules rule the roost.

The Tax Cut and Jobs Act, now entering its second tax filing season, simplified the tax code for many, but added new wrinkles for others. The 199A deduction on pass-through business income might compel some business owners to restructure their business and profitability to maximize the 20% deduction.  Understanding the nuance of this law is vital to tax planning strategies, and may be uncharted territory for many tax advisors.

Similarly, the recently passed SECURE Act eliminates the stretch provision for IRAs passed down to heirs. Preparers will have to learn on the fly how to understand the how the math may flip-flop and navigate some potentially onerous tax implications over a ten-year period.

Credentials aren’t always required

The only standard that preparers must have is an up-to-date Preparer Tax Identification Number (PTIN). Unfortunately, a PTIN confers absolutely no expertise in preparing and filing tax returns. Yes, an attorney or a CPA can have a PTIN, but so can the man who lives down by the river.

Education and experience make a tax person a tax expert. When you work with certified professionals (such as enrolled agents, CPAs and attorneys), you increase the likelihood of dealing with a qualified professional who has the necessary experience to safely guide you through a complex situation.

CPA ≠ tax expert

The letters CPA on someone’s business card mean they are a tax expert, right? Hardly. Many CPAs are actually auditors who review corporate financial statements. They typically have little exposure to the tax side of the accounting world, much less the specifics of personal taxes. Even "tax" CPAs can be similarly unqualified to help you with your taxes. For example, a CPA could know all there is to know about international taxation of large publicly traded companies, but little about required minimum distribution minimization strategies.

Ultimately, it's important to match your preparer’s expertise with your needs. Using a tax preparer who is also a CPA is my preferred standard — so long as the CPA has experience with individual income tax and other related issues.

I didn’t prepare your return.

The sheer volume of incoming returns within such a short period of time often means your return is prepared in stages by your preparer. A junior associate organizes and inputs your information, and a manager or partner reviews the return before delivering it to you.

That’s OK, and is considered to be a best practice by the industry because it offers a system with checks and balances. However, a tiered approach doesn't guarantee that the reviewer always catches the mistakes made by the preparer. The key to getting the best service is to understand how much time the reviewer spent on your return vs. the junior preparer.

Your personal information may have been outsourced overseas

It is an increasingly common occurrence for your tax preparer to outsource your return:  to another colleague in the different regional office, to a preparer at another CPA firm in another state, or even to a professional on the other side of the world.  To outsource internationally, the firm is required to provide a disclosure as part of your engagement letter. But that disclosure might be buried.

Ask questions! Inquire as to whether any part of the preparation was outsourced to another firm. If so, did your information leave the local area? Did it leave the country? Make sure you know.

I may not minimize your tax bill

Taxes are tricky, even for a tax professional. Accordingly, preparers often apply general principles vs. researching potentially advantageous exceptions. There are sound reasons behind this approach:

  • To reduce the odds of provoking a tax notice (and the potential of a higher tax bill).
  • To help contain costs. Identifying exceptions takes time, which is often billed on an hourly basis.
  • To reduce the preparer’s liability in the event you are audited, lose and try to recover the funds.

If you want to be more aggressive, say so. Just remember that you have to be willing to pay the fees necessary for the preparer to research the issue and reach an accurate conclusion. Be mindful of the costs vs. the benefits, and avoid paying $1,000 in fees to save only $1,000 in taxes.

Fear might be preventing me from saving you more

People want to spend their money on things they are passionate about. Let’s face it, most people are not passionate about paying taxes. But your frugality might cost you.

Fear of sending along a steep hourly bill often means a preparer won’t turn over every leaf looking for ways to save you on taxes. Let your preparer know that you want them to be on the lookout for tax-saving opportunities, and that you are willing to pay them to do so.

If you are concerned about "bill creep," simply request the preparer provide an estimate in advance of how much it will cost before proceeding on any specific opportunity. Most often, you will be able to determine together if it is worth their time — and your money — to research an issue.

If I make a mistake, you might be on the hook


Tax preparers are human, and mistakes happen. When mistakes occur, they can result in three negative consequences: additional tax owed, penalties and interest.  If the mistake is truly the fault of a tax preparer, their responsibility is defined in the contract you sign with your tax preparer, so be sure to carefully read it to understand both your and their responsibilities. 

Typically, additional tax is your responsibility, while penalties and interest may be covered by the tax preparer.  But the amount of their obligation may be limited in the contract.    If the mistake is due to you providing inaccurate or incomplete information, you could be paying for everything. Make sure to review your tax return before you sign it.  

I’m not your personal filing cabinet

Your tax preparer probably does a pretty good job of providing personalized service. Still, he or she may have hundreds, if not thousands, of clients. Keeping all these tax records is a costly, risk-laden exercise for the tax preparer. There are no industrywide standards on document retention, and, as a result, your records may ultimately be purged according to your tax preparer's unique policy.

Knowing this policy upfront, and offering to pay for archiving services (if needed), will help you avoid being empty-handed if a tax official comes knocking.

Paying an expert to prepare your taxes is simple and makes a lot of sense. Finding the right person to prepare your taxes is a bit more complicated. Make sure you thoroughly understand your preparer's competence and experience so that you aren't leaving money on the table come April 15.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This article originally appeared on February 19, 2020 on Kiplinger.com. You may view the original article here.

Brian Vnak

Brian Vnak

Vice President, Advisory Services

CFP®, CPA, Series 7 Securities Registration,1Series 66 Advisory Registration,† Insurance License Brian diligently advises clients on income, gift, trust and estate tax issues while leveraging the expertise of the Roundtable to deliver comprehensive, customized strategies. For more than 10 years he has helped numerous clients develop and implement sophisticated financial, tax and estate strategies that are in alignment with their goals and values. Brian is a...Read More